Suresh Company reports the following segment (department) income results for the year.Department M Department N Department 0 Department P$ 82,000$ 44,000$ 78,000$ 65,000SalesExpensesAvoidableUnavoidableTotal expensesIncome (loss)DepartmentDepartment MDepartment NDepartment ODepartment PDepartment T17,30045,40057,80021,60075, 10067,000$ 6,900 $ (23,000)Decision18,0005,70023,700$ 54,30021,50054,30075,800$ (10,800)Department T$ 43,00051,30020,30071, 600$ (28,600)Total$ 312,000a. If the company plans to eliminate departments that have sales less than avoidable costs, which department(s) would be eliminated?153,500159, 700313, 200$ (1,200)

An avoidable cost is a cost that shall incur only when such activities are happened or vice versa.a. Evaluation of decision making. Department decision making Dept M Continue Dept N Discontinue Dept O continue Dept P continue Dept T Discontinue For departments M,O,P the value of sales is greater than avoidable costs hence these departments are to be continued. For departments N and T the value of sales is lesser than avoidable costs hence these departments are to be discontinued and eliminated.

Business

Accounting

Sales Expenses Avoidable Unavoidable Total expenses Income (loss) partment partment M partment N partment O partment P partment T Department M Department N Department 0 Department P $82,000 $ 44,000 $ 78,000 $ 65,000 Decision 17,300 57,800 75, 100 $ 6,900 45,400 21,600 67,000 $ (23,000) 18,000 5,700 23,700 $ 54,300 21,500 54,300 75,800 $ (10,800) Department T $ 43,000 51,300 20,300 71, 600 $ (28,600) Total $ 312,000 the company plans to eliminate departments that have sales less than avoidable costs, which department(s) would be elimina 153,500 159, 700 313, 200 $ (1,200)

Sales Expenses Avoidable Unavoidable Total expenses Income (loss) partment partment M partment N partment O partment P partment T Department M Department N Department 0 Department P $82,000 $ 44,000 $ 78,000 $ 65,000 Decision 17,300 57,800 75, 100 $ 6,900 45,400 21,600 67,000 $ (23,000) 18,000 5,700 23,700 $ 54,300 21,500 54,300 75,800 $ (10,800) Department T $ 43,000 51,300 20,300 71, 600 $ (28,600) Total $ 312,000 the company plans to eliminate departments that have sales less than avoidable costs, which department(s) would be elimina 153,500 159, 700 313, 200 $ (1,200)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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